“This is a worst-case scenario”

I've been posting a lot about China's commitment to renewable energy and sustainable development. Those accounts are accurate, but China is also committed to fueling its expanding economy as efficiently and as cheaply as possible -- at least in the near term. As a result China is burning more coal than anyone else. In fact, it has evolved from a coal exporter to net importer. (GW)

Importing Coal, China Burns It as Others Stop

By Elisabeth Rosenthal
New York Times
November 21, 2010

Even as developed countries close or limit the construction of coal-fired power plants out of concern over pollution and climate-warming emissions, coal has found a rapidly expanding market elsewhere: Asia, particularly China.

At ports in Canada, Australia, Indonesia, Colombia and South Africa, ships are lining up to load coal for furnaces in China, which has evolved virtually overnight from a coal exporter to one of the world’s leading purchasers.

The United States now ships coal to China via Canada, but coal companies are scouting for new loading ports in Washington State. New mines are being planned for the Rockies and the Pacific Northwest. Indeed, some of the world’s more environmentally progressive regions are nascent epicenters of the new coal export trade, creating political tensions between business and environmental goals.

Traditionally, coal is burned near where it is mined — particularly so-called thermal or steaming coal, used for heat and electricity. But in the last few years, long-distance international coal exports have been surging because of China’s galloping economy, which now burns half of the six billion tons of coal used globally each year.

As a result, not only are the pollutants that developed countries have tried to reduce finding their way into the atmosphere anyway, but ships chugging halfway around the globe are spewing still more.

And the rush to feed this new Asian market has helped double the price of coal over the past five years, leading to a renaissance of mining and exploration in many parts of the world.

“This is a worst-case scenario,” said David Graham-Caso, spokesman for the Sierra Club, which estimates that its “Beyond Coal” campaign has helped to block 139 proposed coal plants in the United States over the last few years. “We don’t want this coal burned here, but we don’t want it burned at all. This is undermining everything we’ve accomplished.”

In Australia, environmental groups have repeatedly halted trainloads of coal headed to the export docks at Newcastle this fall, and flotillas of kayaking protesters have delayed cargo pickups by Asia-bound coal ships.

Julia Gillard, Australia’s newly elected prime minister, promised during her campaign to “put a price on carbon” — in other words, make companies pay in some way for excessive carbon dioxide emissions. But environmentalists say that such laws will be meaningless if the country continues its nascent coal rush and “exports global warming to the world,” as one group, Rising Tide Australia, puts it.

This summer an Australian company signed a $60 billion contract with a state enterprise, China Power International Development, to supply coal to Chinese power stations beginning in 2013 from a vast complex of mines, called China First, to be built in the Australian outback. It was Australia’s largest export contract ever, the company said.

The deal points to the love-hate relationship many wealthier countries have with coal: while environmental laws have made it progressively harder to build new coal-fired power plants, they do not restrict coal mining to the same extent.

That is partly because emissions accounting standards focus on where a fuel is burned, not where it is dug up; because the coal trade is a lucrative business; and because the labor-intensive mining industry creates jobs.

Such benefits are particularly hard to forgo in the midst of a recession. In the last two years, “There has been an awful lot of mining development, and much of it is based on the potential of these new markets,” said David Price, director of the global steam coal advisory service at IHS-Cera, a global energy consultancy.

Vic Svec, senior vice president of Peabody Energy, the world’s largest private coal company, said it was “planning to send larger and larger amounts of coal” to China.

“Coal is the fastest-growing fuel in the world and will continue to be largely driven by the enormous appetite for energy in Asia,” he said.

The conflict between environmental and trade concerns is gaining momentum in the United States and Canada as well as Australia.

Last year, the United States exported only 2,714 tons of coal to China, according to the United States Energy Information Administration. Yet that figure soared to 2.9 million tons in the first six months of this year alone — huge growth, though still a minuscule fraction of China’s coal imports.

New mines are planned to expand the market further. Earthjustice, a nonprofit environmental law firm, is suing to block the lease of state-owned land in Otter Creek, Mont., to Arch Coal for mining to serve demand in Asia and elsewhere. Likewise, Peabody Energy and Australia’s Ambre Energy have been separately expanding mines and exploring the idea of opening loading ports in the Pacific Northwest.

In Washington State, the city of Tacoma decided Friday that it would not host a proposed coal loading plant, citing “a multitude of business and community factors.” This week officials in Cowlitz County are expected to decide whether to grant a permit for a proposed coal port in Longview, on the border with Oregon.

Environmental groups will be there to oppose the port, noting that policies in both states effectively block new coal-fired plants and that both have plans to close the few that remain. “It’s one step forward, 10 steps back if we allow coal export in our region,” said Brett VandenHeuvel, executive director of the environmental group Columbia Riverkeeper.

Likewise, environmentalists in British Columbia, which enacted the first tax on carbon dioxide emissions in North America two years ago, are incensed that Vancouver has blossomed into a major coal loading location. “It’s just hypocritical,” said Ben West, a spokesman for the Wilderness Committee, a Canadian conservation group.

This summer, Jim Prentice, who was then Canada’s environment minister, announced a national phase-out of dirty coal-fired plants. But mines are primarily regulated by the provinces, said Henry Lau, a spokesman for the ministry. The Canadian government adds that while it is committed to its target of reducing emissions by 17 percent below 2005 levels by 2020, it has to balance “environmental and economic benefits for its citizens.”

The growth and shifts in coal exports to China are impressive, flowering even during the recession. Seaborne trade in thermal coal rose to about 690 million tons this year, up from 385 million in 2001.

The price rose to $60 from $40 a ton five years ago to a high of $200 in 2008. Coal delivered to southern China currently sells for $114 per ton.

China, which was a perennial coal exporter until 2009, the first year that it imported more than it sent out, is expected to import up to 150 million tons this year.

The lucrative export trade with China is expected to continue, said Ian Cronshaw, head of the energy diversification division at the International Energy Agency.

Although it has plentiful domestic supplies, China imports coal because much of its own is low grade and contains impurities. Coal from the Powder River Basin of Montana and Wyoming tends to be low in sulfur, for example, allowing power plants to burn more without exceeding local pollution limits.

Additionally, much of China’s coal is inland while the factories are on the coast; it is often easier to ship coal from North America, Australia or even South America.

Another emerging customer is India, whose coal imports rose from 36 million tons in 2008 to 60 million tons in 2009, the last full year for which data is available.

In Europe and the United States, coal seems past its prime, with consumption generally down from five years ago because of the recession, environmental laws and a greater reliance on natural gas and renewable energy.

For some economies, China has been a lifesaver. Although Colombia’s coal exports collapsed in 2008 when demand in America and Europe plummeted, they revived this year, with 10 million tons going to Asia.

For Australia, coal exports to China grew to $5.6 billion from $508 million between 2008 and 2009, government statistics show. While it still sends more coal to its longtime customers Japan and Korea, that balance could shift as Australian coal giants sink billions into new projects like China First.

“They are betting that there will be great markets for coal in China,” Mr. Cronshaw said.